Estimating Self‐Selection of Immigrants: Comparing Earnings Differentials Between Natives and Immigrants in the US and Israel

Immigrants’ economic assimilation in host countries is determined by patterns of self‐selection on both – observed attributes (mainly human capital) and unobserved attributes of the immigrants from their source countries. In the present study immigrants’ economic assimilation in the United States and Israel are compared. More specifically, the study compares the impact of immigrants’ unobserved characteristics on their earnings in both countries by applying a model for decomposing difference in differentials. It makes use of United States and Israeli decennial census data for comparing self‐selection patterns on unobserved attributes of Jewish immigrants from the former Soviet Union (FSU) who arrived in the United States and Israel during the 1970s. The results indicate that FSU immigrants who chose the United States have significantly higher levels of unobserved earnings determinants than those who chose Israel. These results are discussed in light of migration theories.